Tag Archives: Finance

Perfect Storm for silver

14 Sep

Usually this blog is a platform for my vexation at the Japanese government and the flaws within the system. However I thought I would turn to a subject that is near and dear to my heart which is that of precious metals and specifically silver

There are most certainly a lot of moving numbers in the calculations and quite a few relatively tweaked assumptions to work off including but certainly not limited to the GSR in the neighborhood of 16. I am unconvinced that we see anything close to that kind of ratio going forward or at least within our lifetimes but I will be happy to be wrong about that. Also one must remember that in addition to the somewhat murky total overall AG recycle numbers there is also the highly significant aspect of alternative methods of production or various alloys that can increase or decrease the industrial demand on silver. Its a bear of a calculation but I believe it worth at least a few minutes of careful consideration per day.

I too have preferred silver to gold mostly because I adore the color of it. Gold has a wonderful allure but silver is just so much more appealing to this stacker. Further I have heard the argument made that “since banks are collecting gold it is therefore the preferred method of maintaining buying power”. I think there are a number of positions one can take to this conclusion but lets stick to the topic at hand shall we ?

I try to keep everything within the perspective of history since it is a subject I enjoy doing in my spare time. It is also convenient for the GSR and precious metals discussions on boards such as this and so I present to you the historic Perfect Storm for silver. I would be prepared to argue that if such an instance occurred in the past there is a distinct possibility of it happening again in the future.

Silver production spiked after the “discovery” and mining of Potosi by the Spanish. There was also an interestingly comparative need for it in China at about the same time due a set of issues that were mostly political in nature. The Chinese were suffering from a series of paper fiat issuances which forced those who used the currency into a “spend it or lose it” situation every time the government changed hands. Chinese copper coins were being used as a measure of value but it was worth more as a medium of exchange than its base metal weight or value so there wasn’t much incentive in continuing the practice. Further the influx of silver into the European continent in such large amounts was causing a drop in its relative value. It was essentially a perfect convergence for silver further magnified by a lack of demand in the Chinese domestic market for European exports while there was a high demand for Chinese exports in European domestic markets which the Spanish had ample access to.

So at the risk of repeating myself, the Chinese wanted silver as a store of value in addition to needing an underlying metal with a relatively fixed rate of exchange to help alleviate their currency concerns. The Spanish in turn had an abundance of Potosi mined AG with a diminishing value going forward and a correspondingly high European markets demand for silk, porcelain and other Chinese goods. A market was established in Manila and the rest is history.

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Damn the torpedoes, full speed ahead

19 Aug

This famous saying has been attributed to David Farragut during the Civil war battle of Mobile. It means to move forward despite the danger of doing so. I feel its a rather apt way of describing the recent clown car antics from the current government of Japan. Despite the danger they are going straight ahead into almost certain hazardous conditions. However, Unlike Mr Farragut who faced rebel mines in the bay of Mobile, these dangerous conditions are created by these same Japanese politicians who now bravely venture forth to challenge their self made demons.

What are these self made demons ?

Look no farther than LDP cabinet level ministers visiting Yasukuni shrine, such as Yoshitaka Shindo who is head of internal affairs and communications. Does anyone else find it ironic that the chief minister in charge of communications is the one pissing off regional powers ?

In my last post I concluded by pointing out the concept of foreign perception, which clearly eludes the current LDP government in Japan. The response did not take long, South Korean President Park said “it is hard to build trust without the willingness to face history.” She also said “I expect responsible and sincere steps to be taken to heal the wounds of those who are still suffering.”

The ambassador of Japan was summoned in Beijing to answer for the insult. Foreign ministry spokesman Hong Lei said Beijing was “strongly opposed to the visit,” and that the people of China as well as his government had been “seriously hurt,” by the visit. “If Japan cannot seriously examine its history, relations between Japan and its neighboring countries will have no future.”

Meanwhile the Japanese continue to preach to the choir. All sorts of reasons, intentions and explanations have followed all trying to justify the ministry visits. The message resonates domestically within the archipelago while none of the international reactions are broadcast to the Japanese people.

There is a profound and almost complete disconnection between the cultures in the region and it appears to be growing more distant. Full speed ahead and damn the icebergs, this is the Titanic after all.

Good work LDP

July 12

9 Jun

Mark your calendar boys, girls and bots because that is the day when the upper house of the Japanese parliament will have an election. Besides the obvious conclusion that an election has the possibility to change policy, this particular election holds more weight than normal because it is in the upper house that Abe’s policies have faced opposition.

So the question is will the Suzuki, Sato and Watanabe’s go out and continue to support the LDP and their Abenomic policies ? If they do in fact go out and vote up the LDP party line thus paving the way for less resistance to Abe’s choices then look for things to really grind into gear round these parts.

120 yen to the dollar is not outside the realm of possibility.

Nor will a corresponding response from the Koreans be of any surprise. These two nations are essentially fighting over a similar market share and I highly doubt Seoul is going to sit by while Japan continues to devalue its way to an export boom.

My advice is that if you are going to be in the market for anything out of East Asia such as a car, power tools, bearings, robotics etc you wait to see how things shake out. For in waiting you are bound to see a drop in prices, especially if you are holding dollars.

On a side note we here at casa DCY have scheduled a meeting with our local bank to renegotiate our fixed rate mortgage. It should be an interesting event as those who are paying attention can see a distinct rise in rates coming down the line and are rushing to lock in low low rates now.

When and if we are successful I will do my best to update you on the process. Wish us luck cause we are going to need it.

Yen weakens

12 May

For anyone that was paying attention they could clearly see where the Abe government was headed with their new and improved fiscal policy. Then yen has now moved to about 100 to the dollar and will perhaps further weaken. My hunch is that we can easily a 106-108 range by this summer thus further boosting the bottom line.

Business sites across Japan are announcing the return to profit for many of Japans larger corporations. Boosted by the weakened yen, Japan’s value added exports are seeing a nice bump. Will it have any staying power is the question. With elections approaching we will see how well the LDP can continue to grease the wheels of the voters. I have already discussed the antiquated parliamentary district issue as being a key point in how the LDP returned to power. I fully expect this round to be a full menu of “more of the same” with Mr Abe heading into the summer/fall season with higher export numbers boosting his support.

Perhaps the Japanese government will then turn its attention to its rather pathetic attempts of foreign policy. This could become a comedy of errors as pro Japanese officials continue to comment on regional issues without regard to how their comments will be interpreted by their neighbors. There seems to be a never ending parade of stupid comments sent around the world by those who speak about Japan’s strengths in terms of the other party’s weakness. For example, Tokyo’s governor Inose was critical of Istanbul’s bid for the Olympics in an interview with the NY Times and later had to issue a formal apology. This is typical of the foreign policy playbook here.

Its rather interesting because in day to day interactions between the Japanese people the words, manners and tone between them are very carefully chosen. In fact they often bend over backwards to be polite, yet when it comes to handling important international affairs the shoe somehow seems to find its way into the mouth of some well meaning politician. Hope remains but to the experienced its simply a question of time before another comment creates another fiasco.

So we head into the summer of 2013 with elections on the horizon, the nukes due to be turned back on, then yen continuing to weaken and the island controversy still brewing. It is going to get more interesting round here.

The comedy continues

23 Apr

I guess for Americans dealing with the Boston bombing news other issues have fallen off the priority list, but I can assure you that Korea remains a big problem here in East Asia. So where is the comedy in this situation you ask ? Well I can honestly tell you that at this point I am never surprised by the propensity of the Japanese to shoot themselves in the foot.

Today it was announced that the Korean Foreign Minister was cancelling his high level talks with the Abe government as a protest over Japanese cabinet ministers visiting the Yasukuni war shrine earlier in the month. You would think that it would be in both countries best interest to at least discuss trade, finance and other issues after the major announcement by the Bank of Japan to further its quantitative easing policy. For those who didn’t already know the Koreans and Japanese are fighting over a very similar export market share and I doubt the Koreans sit by and let the Yen continue to devalue without taking similar action with the Won.

So deputy prime minister and former prime minister Taro Aso publicly decides to visit Yasukuni and nobody takes the the time to inform him that he might want to wait until AFTER the high level Korean talks ? Seriously ? Who is in charge of Japanese policy Mickey Mouse ? No wait don’t answer that question because Mickey might do a better job of it than the current administration. Its a laughable situation and very illustrative of how puerile and ignorant the Japanese are when it comes to how they handle foreign policy. Perhaps they already knew that the talks with Korea wouldn’t garner any traction but why schedule them in the first place ?

Further darkening the waters its now being reported that up to 80 Japanese nationalists are en route to visit the disputed Daioyu-Senkaku islands. While I am sure they do not have official government sanction to visit the area you can be sure that privately these kinds of excursions are met with a supporting nod and words of affirmation in upper echelon circles within the government of Japan.

I wonder what other neighbor the Abe government can piss off before the month is out ?

The nukes are coming back online

19 Apr

Its only a question of time now.

A petition to close down Japan’s last 2 operating nuclear reactors was denied by a court in Tokyo this week. I believe this creates a path towards reopening the closed nuke plants once they have been determined to be “safe”. As to how the government is measuring “safeness” is anyone’s guess.

This author is highly skeptical of an energy cabinet and their declarations of safety when prior to the Tsunami the same agency proclaimed the Fukushima plant as safe. Clearly not safe. Yet energy costs are increasingly taking a bigger bite out of the trade balance which may force Abe’s hand sometime this summer when peak demand comes online.

Prior to the Great Earthquake Japan was creating about 30% of its available electric power from nuclear plants. It has also been reported that new sources of uranium have been purchased from the French by the Japanese. Why else would they be buying more fuel ?

It doesn’t take much to connect the dots in this story.

Prices are up

14 Apr

Its been awhile since I last posted but as anticipated the prices of many things here in Japan are up. Tonight the news mentioned that high end rings and jewelry are going up 10%. Meanwhile prices for food are up too as this country imports about 60% of its total caloric intake from overseas. Gas prices are up as well.

Meanwhile the Yen continues to weaken, hopefully to spur sagging exports but somehow I doubt that the Koreans who quite likely are in the same export market segments as the Japanese will sit idly by while Shinzo Abe follows his policy of further QE.

I still cannot understand why people vote to support a man who openly talks about inflation. This is in a country where it costs you $6.50 just to sit in a taxicab. However a closer look at the situation reveals why the LDP has taken power. In a word “redistricting”. The political lines in Japan have remained the same for quite some time. In fact I don’t know how long it has been since the country adjusted them but as it currently stands the educated city dweller has very little representation while the rapidly depopulating rural areas continue to send large numbers of representatives to Tokyo where they vote in large numbers to support LDP infrastructure projects. Knowing how things work helps to better understand why Shinzo Abe can openly say that a 2% inflation rate is his party’s goal.

The way I see it things are not going to get better for the average consumer and the elderly are going to be in for a shock at the supermarkets. On the other hand large corporate bonuses were paid this year so ideally the lucky recipients will spend the money boosting demand. I am not holding my breath however.

Best of luck to the PM and the LDP. They are going to need it.

Mr Abe still going strong

8 Mar

I had some free time this afternoon while eating an early dinner so decided to turn on NHK and watch the Japanese government discuss current business. There was quite a lot of talk about TPP aka free trade and while I have quite a few opinions about Japan and free trade I wanted to take the time this evening to mention that Prime Minister Shizo Abe looked very healthy and enthusiastic. He had color in his face and a stride to his step. He jumped up nimbly to answer more than a few questions.

Now this doesn’t necessarily mean anything but from a guy who has been watching the PM closely since his election, Mr Abe does not show any signs of wearing down or losing his verve. I wonder how long he can continue to fire on all cylinders ?

As far as Japan and free trade goes I will post something about it in the near future. For now Mr Abe is looking genki and still has a majority of public support. His numbers are holding north of 60% and his financial policies continue to hold sway.

March 15 is tax day here so it could be quite interesting to see how the year end accounting is reported.

Prices are up ?

24 Feb

Since the LDP swept back into power the Abe government has proudly and often stated that their goal is to increase inflation. As to why the public at large would actually vote for such a proposal is somewhat disheartening and is probably more closely related in a desire to change government from the NDP rather than support for the LDP. Among the people I have talked with, many of them have expressed a desire to do something which is in itself holds some merit. For those of you who don’t quite understand the Japanese mindset, the choice between doing nothing versus something here often results in doing nothing. A lot of time, attention and money is spent in meetings discussing things that are never done, so the fact that people are telling me that they WANT change and WANT something to happen is a leading indicator of more “news” to come.

Perhaps had the general voting public better understood what the Abe government wanted they might have opted for the do nothing approach. In an effort to boost exports the yen has dropped quite significantly. Yet trade has not improved published numbers show an across the board dip in exports. Perhaps that is somewhat attributable to China being approximately 20% of Japan’s market while the Abe government talks tough on the disputed islands. Once again a clear foreign policy failure by the Japanese government who has shored up its domestic support with “China is the problem” comments at the expense of its corporate overseas earnings. I suppose we should wait another quarter or two to see how things transpire but I am not hopeful that things will change.

The drop in the yen’s strength dovetails nicely with an increase in the Japanese governments buying of US debt. So perhaps with tacit agreement by the US, Japan has devalued the yen in an effort to boost sales. We will see soon enough if this is a winning formula. I believe it is perhaps short term “winning” tactic but a long term losing strategy. Japan has not addressed its core issues going forward and is simply creating more debt in the public sector. Further with March 15 tax day approaching, many of the government programs will expire. For example if one wants to buy a “light” car and you want to take advantage of some government support, you need to purchase your car prior to March 15. Last time I checked I heard that qualified candidates might get up to about 800 bucks back on a new car. Cash for clunkers anyone ?

Actually my wife and I will be buying a new light car in the next few weeks so I will try and post something about the experience.

With the yen dropping in value, import prices are rising. Bananas, Gasoline, Meat are all already up in price or scheduled to rise. Yay, your average blue collar family now has less money to spend on education, paying off loans etc. Meanwhile the alleged export boost has failed to materialize. I can’t say how long it will take for the voting public to recognize that they have voted against their own best interests but if the pattern holds true I would say by August or Christmas at latest Mr Abe will start feeling the pressure to announce elections.

Now is the time for him to act. I believe he is going to get the BOJ and finance department changes he wants, further weakening the yen. He has been open in his declarations about the LDP plan so far and he knows better than anyone that his support will fall off going forward. He has to move forward with the LDP blueprint and hope that it shows results.

What has me scratching my head is how inflation among the things the general public consumes is going to benefit the Japanese people. Prices are still too high here and that is after 20 years of deflation. I am certainly not wishing the LDP ill will as my adopted country needs to change course but I honestly don’t believe that Abe’s decisions are best for the Japanese people. Maybe I will be proved wrong, but I doubt it.

Forecast is for stormy skies ahead

5 Feb

Sad to say that it appears things are looking worse round these parts.

TEPCO has received an additional 700,000,000,000 in yen for their Fukushima compensation fund putting the total available at 3,240,000,000,000 yen. Yes that’s 3 trillion yen folks. The monies are to be spent on projects and other expenses related to the nuclear meltdown and are already being poached by the criminal elements in society.

Decontamination crews have had their wages cut or withheld by employers out to milk the system. I would rather not get into the ugly details about what “decontamination” means here but simply put persons using a dirty rag to wipe off a roof tile are part of the solution. Further there isn’t a place to keep the dirty soil so it is put in garbage bags and piled up wherever they can find space. I guess its the heftybag solution to nuclear fallout.

I just read that a toxic smog from China is now floating over Japan. Its not surprising that this would occur due to the following facts;

1. China puts a new coal fired power plant online every 3 weeks and will do so for the next 20 years
2. The quality of China’s coal is marginal and has a very dirty burn resulting in a high particulate rate
3. During Winter the winds blow from the West to the East, thus Japan is downwind from China

People are being cautioned about going outside, especially the young and old. its interesting as many schools have just completed their mandatory student marathon class. Perhaps the air was unhealthy then as well ? I don’t know for sure but it wouldn’t surprise me in the least if it was.

Its hardly scientific but a number of people in my neighborhood have all experienced nausea, vomiting and severe headaches over the past week or so. Perhaps there isn’t a correlation but then again…

Our local newspapers here are now reporting that Mount Fuji has increased pressure. The mountain is starting to vent gas along the NE side. Lakes near the base of the mountain also have heightened water levels of about 1 meter. The entire area is a subduction zone with Suruga Bay pushing under Fuji like an escalator. My neighbor mentioned Fuji acts like a clock erupting every 300 years. The last eruption was 1707.

So its good news all around !

The Abe government continues to devalue the yen so as a result prices are starting to climb at the retail level. Perhaps I have mentioned some of this news before but I thought it prudent to post it in case I hadn’t.

Anyway today we are off the wholesale food shop and to kick the tires at a local car dealer. With some luck we will get a credit approval for a rock bottom low rate on a car loan. Lock in a fixed rate and smile all the way to the bank if and when the Yen hits 150.